Quality Of Trading Risk Management Practices Varies In Financial Institutions

During the late fall of 2004, Standard & Poor’s Ratings Services conducted global in-depth reviews of the trading risk management (TRM) practices at 23 leading financial institutions. The reviews entailed detailed interviews and presentations by senior management of the institutions surveyed to Standard and Poor’s. This article provides the findings of that survey and explains the process and methodology employed by Standard & Poor’s in assessing the TRM practices at these institutions. As a caveat, it should be noted that at the time Standard and Poor’s conducted its reviews, a few institutions were in the process of enhancing some of their trading risk management practices. However, that did not have any material impact on the general findings described below.